Bronson Financial Services » Estate Planning

Women Managing Money

admin — Thu, 27 Jan 2011 01:38:39 +0000

I had a bit of a flick through the Financial Literacy Foundation’s recent report Financial Literacy Women Understanding Money and came across some positive results for women in general.

The report confirmed what is already well known about the ladies, that is that the fairer sex have budgeting and saving habits down pat. It is a well known industry fact that women control over 80 percent of household spending and influence 99 percent of household purchasing decisions. It was no surprise then to read that women in general are highly confident in their ability to budget, their ability to save and their ability to manage debt. This is good news for the ladies because good budgeting and saving habits are vital steps for good money management.

It was also no surprise to read that the ladies tend to let themselves down a little when it comes to their retirement planning. Many said they hadn’t thought about their long-term financial plans for their future and retirement or considered retirement to be too far away for them to think about. The real worry however was that some of them felt financial planning was only important for those who had lots of money. I’m not quite sure how much “lots of money” is, but every woman needs to take responsibility for her financial planning regardless of how much or how little money she has.

The real worry about the ladies’ retirement planning is that over a lifetime women on average earn less, have lower super balances, broken work patterns often because of family commitments and statistically speaking live longer. Because of these trends, long term retirement planning should be a must for all the ladies, not one of those jobs that they will eventually get around to.

Interestingly the report found women are very confident in their ability to get information about money with a majority having sought financial information from professionals such as a financial planner, accountant or banks. Even better, women are more likely than men to consider getting information and advice to help with the financial management. It’s a bit like women’s insistence on asking for directions when lost in comparison to the blokes who insist on driving around, in circles if they have to, rather than admitting that they need help!

The ladies do feel a bit intimidated when it comes to complex issues like investing or understanding financial language. This is a bit of a wake call for us in the financial planning industry to ensure that we speak in every day language and not financial gobblygook , an easy habit to get into when you are surrounded by financial staff every day.

Overall women make great clients. They’re thirsty for knowledge, willing to consider all options and fiercely loyal when they find someone they trust. If you’re looking for someone you can trust, that’s interested in your financial needs, then give us a call on (07) 5577 8653.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

Please Note:

This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country.

Mortgage Stress and your life insurance

admin — Thu, 27 Jan 2011 01:24:32 +0000

The other day while I was having a reshuffle of some paperwork on my desk, I came across an article showing a breakdown on what causes mortgage stress. With yo-yoing interest rates, mortgage stress is the flavour of the month.

Before your eyes glaze over with boredom, what do you think is the main cause of mortgage stress? Most people are quick to point their finger at the banks, people’s lifestyles and the economy in general. But a report from Genworth Financial, one of Australia’s largest mortgage insurers, found that while rising mortgage repayments did put pressure on the household budget, generally it was a significant lifestyle event that acted as a trigger for a borrower’s inability to meet their debts.

Their research found illness or injury was the biggest cause of hardship, representing 38% of hardship applications in comparison with just 2% of applications because of over commitment to a mortgage.

These interesting statistics lead me to my next favourite topic, underinsurance, where you don’t have enough insurance to protect yourself, your home or your family if a catastrophic event occurs. I have already written about the massive problem of underinsurance in my earlier blog Life Cover – Protect your family from life’s surprises so I won’t revisit the figures in this article. But if you’re curious, have look at my blog as it has some interesting figures about life insurance, or rather the lack of, life insurance in Australia.

In any event the article did give me cause to ponder, once again, on why people aren’t taking out life insurance. It might be that people are not sure how personal insurances work or believe it is out of their budget. Maybe people feel intimidated approaching an insurance adviser for advice.

If you think you’re underinsured, the biggest favour you can do for yourself and your family is at least take the first step and contact your financial planner or insurance adviser to allow them to assess your situation. Don’t be shy – whatever your budget, whatever your situation, there is an insurance plan out there that suits you and your family.

If you’re still not convinced that you need insurance to protect your families, consider this. Life insurance isn’t about you, it’s about the people you leave behind who have to pick up the financial pieces after you’re gone.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Life Insurance – Company Perks

admin — Thu, 27 Jan 2011 01:22:12 +0000

Perkonomics – funny word, interesting concept.

I was having a bit of a web surf the other day and came across “perkonomics1″, described as perks and privileges given by a business to a customer, particularly those little perks that may give a client a bit of status or convenience.

Some of their examples included Lexus owners in Australia given the opportunity for free parking at a number of cultural centers, including the Sydney Opera House or Palmeiras, one of the major football teams in Brazil, reserving 5,000 seats exclusively for Visa Card customers.

When it comes to financial planning fees or insurance premiums people are quick to think of the money going out, on how much it will cost them, and not so quick to think of what they may be getting in return.

Now your insurance company or financial planner may not offer perks as lovely as a free car park at the Opera House and if they did you may want to question why, but there are plenty of pluses in sticking it out with your financial and insurance plan.

There’s the obvious benefits of course including having choices and financial freedom in your old age and protecting yourself and your family during traumatic events such as illness or injury. But what are some of the lesser known perks that may make life a little easier for you? I have listed a few below to get you thinking.

Payable benefits may be increased or free accidental cover may be offered by your insurance company if you continue your cover for a certain period of time, often about five years.
Expert advice from worldwide medical doctors and institutions if you are paid a benefit for a critical illness as part of a trauma or permanent disability policy.
Grief and support services may be offered to your immediate family as a result of a traumatic event at the time of claim.
Insurance premiums may be temporarily suspended if you find yourself without employment or on maternity leave.
Assistance towards financial planning costs may be provided if a lump sum benefit is paid.
Loyalty discounts on premiums may be offered if you personally have two or more policies.
Further discounts may be given by having multiple lives. We’re not talking about the family moggy here, we mean you may get offered a discount if you and your partner take out life insurance, and additional discounts may be given if your brother or various extended family members also take out cover. Multiple lives discounts may be offered in a business partnership as well.
In terms of investments, Agribusinesses may offer grower tours where you can undertake site tours and as an investor you may be able to buy their products at discounted prices.
Fund managers may provide seminars to help you stay educated and on top of financial markets.

Not all companies offer the same benefits, so you may need to shop around to find which products suit you. Better still, save yourself loads of time by engaging a financial planner to put together an insurance and financial plan to suit your circumstances.

1http://www.trendwatching.com

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Income Protection for Men

admin — Thu, 27 Jan 2011 01:10:55 +0000

Do you how much Centrelink pays for sickness benefits? In case you’re curious, it’s just over $400 a week1 for a couple, not enough to even service the weekly mortgage repayment on an average mortgage, let alone feed a family or meet the lease payment on the fancy ute sitting in the driveway.

Most of us are not interested in Centrelink benefits until we’re staring down the barrel of financial ruin brought on by an inability to meet our commitments, most often which comes about because of unexpected illness or injury. And don’t think you’re immune. While there are statistics, statistics and then there are statistics, research consistently shows that the blokes more so than the girls are likely to suffer from an illness or injury. Here are some statistics to get you thinking:

A 30 year old male has a one in three chance of suffering an illness or injury before 70.2
Men have a higher work-related injury or illness rate (74 per 1,000 men) than women (51 per 1,000 women).3
The industries with the highest work-related injury or illness rates are agriculture, forestry and fishing, and construction and mining3 – industries dominated by men.

These figures are also reflected in insurance statistics. A quick look at ING4 and Aviva5 statistics for example shows the most common occupation to become injured are tradespeople and building workers with accidents, not illness, as the most common cause for income protection claims. In 2006, 89 percent of ING’s income protection claims were from males, with Aviva reporting a similar figure of 80 percent of income protection claims coming from the guys.

While the statistics are food for thought, adequate insurance protection is essential regardless of the industry you work in. You might think you’re covered by Workers Compensation if you’re injured on the job but ABS research shows that less than half of those who experienced a work-related injury or illness received workers compensation6.

Income protection can provide up to 75 percent of your income if you become injured. And make sure you protect your insured income, not just your taxable income. This is important for those self employed people who may split their income between themselves and a family trust or for those who need to consider vehicle lease arrangements etc.

When taking out your income protection insurance also look at waiting periods, that is, the period of time at which you stop earning an income to when the benefit kicks in. A longer waiting period reduces premiums but you need to be able to cover yourself financially during this period. Also, don’t forget to regularly review your insurance situation. A good time for review is anytime there is a life changing event – a new business venture, a new mortgage, a pay rise, a new family member.

If your insurance needs reviewing, give your financial planner a call, or if you don’t have one call us on (07) 5577 8653 and we will create an insurance plan to suit your circumstances.

http://www.centrelink.gov.au/internet/internet.nsf/payments/pay_how_sck.htm
Based Asteron Claims Data on insured, non smoking lives
Young men at most risk of work-related injury or illness http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6324.0Media%20Release2005-06?opendocument&tabname=Summary&prodno=6324.0&issue=2005-06&num=&view=\
ING Retail Claim Payments 1996 http://www.lifeinsuranceadvocates.com.au/statistics/ING_statistics.pdf
Claims for Income Protection from 1990 – 2006, Aviva. http://www.lifeinsuranceadvocates.com.au/statistics/Aviva_Critical_Illness.pdf
Work -Related Injuries, Australia September 2000, ABS cat 6324.0 October 2001

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Business Succession Planning

admin — Thu, 27 Jan 2011 01:07:34 +0000

We have seen global economies move from boom to bust in the wink of an eye – or over the past 12 months at least. This has led many business commentators to make statements about defensive investments and how to preserve your capital in times of market volatility.

But what about your business – as a business owner you are probably evaluating your product lines, looking for new markets and generally looking at strategies to grow your business in troubling economic times.

But these sorts of times also can take a human toll on you the business owner. Higher levels of stress can lead to illness and business owners that have not taken the necessary steps to protect themselves and their businesses can quickly find themselves a victim of the global economic slowdown.

Consider the following*:

1. 1 in 3 men and 1 in 4 women will suffer from cancer before age 75

2. An Australian dies every 10 minutes from cardiovascular disease

3. A 40 year old male has 1 in 2 chances of having coronary heart disease in their life

4. Working Australians have a 1 in 3 chance of becoming disabled for more than 3 months before turning 65

5. In 2004 over 1,500 people were killed in motor vehicle accidents in Australia

6. Injury is the leading cause of death among people who are under 45 years of age

7. Nearly 1 in 10 men will develop prostate cancer during their lifetime

Each year around 10,000 Australian men are diagnosed with prostate cancer and 2500 die of it.

One of the strategies that may suit you and your business is a Business Succession Plan. The aim of a business succession plan is to ensure that the business survives even after the death or critical illness of one of its principals.

So what happens if a business owner suffers a tragic event and there is no plan in place?

Third parties could end up with an unacceptable degree of control in the business;
A deceased owner’s estate could demand a payout forcing the business to be wound up;
It could be necessary to negotiate additional borrowings or face asset depletion;
The stability of the business could be questioned by suppliers and customers;
Lending institutions could seek repayment or re-negotiation of loan facilities.

Consider this scenario:

The widow looks at her late husband’s business partner as the coffin is lowered into the grave and says to herself:

“If he wants the business, I’ll make him pay double,”

The Business Partner looks at the widow and thinks to himself:

“I’ll offer her a tenth of the value, she wouldn’t know what it is worth and without me, the business is worthless anyway”.

The benefits to you, your family, your business, your business partners and their families are:

For the surviving owners:

Eliminates estate claims to management rights of the business;
Prevents introduction of new owners with incompatible philosophies and agendas;
Protects against control of the business being frozen through probate difficulties or legal restrictions if an owner loses legal capacity;
Provides assurance of the opportunity to buy shares from the owner should they suffer a tragic event;
Predetermines funding for the purchase, as well as the price of the business;
Assures continuity of the business with minimal disruption; and
Provides security for suppliers, staff and creditors.

For the estate of the deceased:

Provides assured purchaser(s) for the business;
Guarantees fair price as well as guaranteed funds to complete the purchase; and
Reduces the delay between suffering the tragic event and receiving insurance proceeds.

If you are currently evaluating your investments and making your defensive plays – have a long hard think about the strategies you have in place to protect your most valuable asset – your ability to generate an income and what your family would do if you, the money making machine broke down completely.

*We are not making the stats up – here are our references:

1. Cancer in Australia 2001’, Cancer Series no. 28, Australian Institute of Health and Welfare, www.aihw.gov.au

2. ‘The Shifting Burden of Cardiovascular disease in Australia’, Access Economics and Heart Foundation 2005, www.heartfoundation.com.au.

3. ‘Heart, Stroke and Vascular disease’, 2001 Australian Institute of Health and Welfare www.aihw.gov.au

4. Calculations based on data from the Institute of Actuaries of Australia (2000) Interim report of the disability committee.IA Aust: Sydney

5. Year Book Australia 2006, www.abs.gov.au

6. ‘Injury Prevention Control’, 2005, Australian Institute of Health and Welfare,www.aihw.gov.au

7 & 8. Prostate Cancer Foundation of Australia 2004, www.prostate.org.au/disease

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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Talking ourselves into a recession

admin — Thu, 27 Jan 2011 00:59:12 +0000

Have you heard the story about the hot dog man and the recession? Well, if you haven’t, it goes something along the following lines:

A humble hot dog man had a successful business selling quality hot dogs. Every customer was served with a smile. One day the man’s son came home from college and told his father a recession was coming so he better cut costs. The hot dog man stopped advertising and garaged some of his hot dog carts. Sales fell. He retrenched staff and used cheap sausages and sales fell further. Eventually he decided he would go back to doing what he was doing, that is selling good quality hot dogs with a smile … and sure enough… sales went up.

You might be asking yourself what’s the point of the story? The motto of the story isn’t whether or not Australia is heading for recession – this depends on whose point of view you wish to take and which newspaper you read the latest bad set of economic numbers come out.

The point is, the story is about how gloom and doom can become self fulfilling and how you have the power to create or avoid your own recession. If you’ve been a sheep and docilely followed the pack by madly buying stock at the height of the stock market rise and now you’re desperately trying to recoup your losses by selling, just like the rest of the pack, then the sensationalist media predictions of loss and financial devastation are likely to come true for you.

At the height of the GFC, our former Prime Minister Mr Rudd and his advisers forecsast that Australia was heading for an economic slowdown with some unfortunate side effects such as job losses. This did not eventuate (says a bit about forecasting doesn’t it), also history has repeatedly shown that after every bust …. eventually there is a boom … but we just don’t know when that will happen.

During periods of bust, people take their money out of the stock market and company stock prices are driven down for reasons that are not always logical. Now is not the time to cash in your chips and park all your spare cash under the mattress. For those with some financial common sense, a downturn provides some great opportunities because everything goes on sale. If you have a bit of spare cash lying around, now might be a good time to consider discussing your investment options with your licensed financial planner.

The stock market isn’t the only area where there also may be an opportunity. In a lead up to an economic downturn, the Reserve Bank will often reduce interest rates in an effort to stimulate the economy and stop it from falling into a recession and we’ve seen that recently with the generous interest rate cut granted by the Reserve Bank in a swift response to the world financial crisis.

Cheaper interest rates mean cheaper debts to companies and lower mortgage rates for families. With stagnating house prices and predictions of further interest rate cuts, now may also be a time when we see the property market change direction.

But remember, while you have the power to create or avoid your own recession and control your financial destiny, also make sure you have a chat to a qualified financial planner who will help steer you on the right financial path.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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What is a Superannuation Binding Nomination?

admin — Thu, 27 Jan 2011 00:53:14 +0000

Does your superannuation fund allow you to provide a binding nomination? Do you know what a binding nomination is? Don’t get confused with the nominated beneficiary box you ticked when filling out the superannuation paperwork that came with the new job you just started.

Few people understand the difference between binding nominations and nominated beneficiaries and few superannuation funds clearly explain the different nominations to their members. Some don’t even offer the provision to nominate anyone. Unless you’re lucky enough to stumble across the paragraph on nominations in the super fund’s member booklet full of fine print that’s too wordy or too legalistic for the average person to understand; or worse, the prints so small that you will need your strongest nana glasses to read it, many people aren’t even aware that such nominations exist.

You may have thought you had all bases covered when you initially filled out your super paperwork and nominated who you wanted to receive your super in the event that you died. While your intentions may have been that it was your spouse or children who would financially benefit from your super and any insurance payouts in the event of your death, unless you have a binding nomination it is the trustee of your super fund who ultimately decides on who receives your benefits.

Generally a fund’s trust deed states that a benefit is paid to a dependant or anyone who is financially dependent in any way on the member. While the deed may in fact reflect your intentions, the super trustees must also go through a claim staking process, which involves notifying anyone who may be entitled to claim on your super. This may encourage people to make a claim, purely because it has come to their intention that they may be entitled to a benefit.

As a result the distribution of a member’s super death benefit can become a time consuming and sometimes costly process. Beneficiaries can appeal the trustee’s decision through the Superannuation Claims Tribunal and due to the processes involved, the distribution of the superannuation proceeds can take many months and even years.

In the meantime, your loved ones are left to deal with the financial, emotional and physical devastation of no longer having you in their life. To add to their difficulties, they are left to deal with the stress of the superannuation claim appeals process, not to mention the disintegrating family relationships that may result from such a process.

Completing a binding nominate will stop this situation from arising. A binding nomination binds the trustee of your super fund to follow your wishes and distribute your benefits to those you have nominated.

You will need to keep your nominations up to date, especially if you marry, re-marry or have children. You will also be asked to update or confirm these nominations every three years, which provides a timely reminder to review your estate and ensure your estate planning is to date.

For more information on binding nominations, contact your super fund and ask for a binding nomination form. If they can’t (or won’t) give us a call on (07) 5577 8653.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653.

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Diabetes and Life Insurance

admin — Thu, 27 Jan 2011 00:50:03 +0000

According to Diabetes Australia 65-80 percent of people with diabetes will die of coronary heart disease, and by 2010 DA estimates that the number of people affected by diabetes is expected to reach 1.8 million. This is scary stuff because a quick calculation suggests that potentially there is anything from about 1.17 million to 1.44 million heart attacks in Australian just waiting happen – just when it will happen is anyone’s guess.

Diabetes also causes other health problems such as blindness, kidney problems and circulation problems, often resulting in amputation. Diabetes 2 is the big concern for health officials because it is a fast growing problem linked to obesity and is considered to be a lifestyle disease.

Too much food and too little exercise is expanding people’s waistlines and bumping them into the land of diabetes 2. What’s a major concern for officials is that while diabetes 2 was once considered an older person’s disease, they are seeing more and more younger people, including children as young as six, being diagnosed with the disease.

While many may be quick to dismiss the lifestyle impact of diabetes by assuming lifestyle changes will fix up the problem, diabetes is with you for life. It’s irreversible and once you’ve got it, you’ve got to manage it forever. Indications are that children diagnosed with diabetes can expect to experience major health problems in their teens and onwards.

So what does diabetes have to do with a financial planner’s site?

We’re not just in the business of wealth creation, we’re also in the business of wealth preservation, and that is achieved by putting into place insurances that will protect you and your family in the event of the diagnosis of a major disease or tragedies such as death or disablement making it impossible for you to work.

And while there been a bit of hype in the media lately about diabetes and its growing impact on Australia’s health system and on a person’s quality of life, not much mention has been made about the flow on impact in other areas, such as insurance. People diagnosed with diabetes for example will struggle to obtain insurance to protect themselves and their loved ones.

Very few insurance companies will provide income protection insurance or trauma insurance to people suffering diabetes because of the strong likelihood of them requiring time off work due to illness arising from their condition. At best, you may be lucky enough to get life insurance but you will pay a higher premium for the privilege.

This may not concern you now. Perhaps you already had the right insurance in place before you were diagnosed, or perhaps you have been fortunate enough to work long enough to get some assets and some cash in the bank that may cushion the financial trauma of being diagnosed with diabetes.

But if it’s your kids who have been diagnosed with type 2 diabetes, not only will they face an uphill battle in obtaining a job because of potential health problems related to their condition, not only is their working life likely to be disrupted because of their diabetes, but they will not be able to protect themselves or the future family from the financial fallout of not being able to work because in all likelihood they will be uninsurable.

Now that’s food for thought.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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The transfer of wealth between generations (or not)

admin — Fri, 21 Jan 2011 04:44:21 +0000

You’ve probably seen those ads for retirement planning featuring retirees on Harley Davidsons saying “Retirement is payback time” or have seen the stickers on the caravans of the grey nomads that say “I’m spending my children’s inheritance.” Or even better, “Live long enough to be a burden on your children”.

We have probably all laughed at that and thought not in my family, I don’t need to plan for retirement, I will get what my parents or grandparents don’t spend. The 2004 Survey of Consumer Finances noted that 21% of people born after 1964 thought they would inherit some money someday. After all, most of them still have living parents or grandparents. I am not sure what the numbers are here in Australia, but I would expect them to be comparable.

So what’s the reality?

Well retirees have a lot of demands on their savings. Living costs, for one, are rising fast. At the same time, many people are not waiting until they die to help their children and grandchildren financially. Finaly the current market turmoil is seeing many people concerned about how long their retirement savings will actually last.

So for these reasons, I come up with 5 reasons why people born after 1964 (and this includes me), need to take accountability for their financial health and no rely on Mum and Dad bailing you out again

People who make it to 65 will live a lot longer. Modern medical advancements will simply keep us alive a lot longer. At age 65, the average male has a life expectancy of 18 years and an average female has a life expectancy of 21 years That’s a combined 39 years of living expenses for couples, and it isn’t easy or fun to scale back your standard of living.
Social Security will probably change. There is not too many people who think that the government will be paying out more in the future that it currently does now. With the talk about keeping people in the work force for even longer, there is even the chance that you may have to wait longer to qualify for a benefit.
Marriage Breakdowns. It is not unusual for a couple to divorce in retirement. After years of being together, they sometimes find in retirement that they have grown apart and simply want to go their own ways. As a result the family fortune is split sooner and between the living parents. Splitting up can be expensive in itself, and maintaining two households for decades afterward will often cost more than sharing a dwelling.
The desire to unlock a home’s equity to meet lifestyle and other costs. The good old reverse mortgage. The reality is that homeowners can tap into the equity in their home without the need to repay it until the house is sold at their death.
There is also the view that the transfer of wealth will increasingly happen while the older generations are still alive. People in the latter halves of their lives now find themselves school fees and university fees for grandchildren. Indeed we have seen people who have been helping their children and grandchildren out with home deposits and even simply bailing them out of mounting debts and a host of other financial calamities.

So that’s some reasons why waiting for the folks to pass it on may not be a smart idea. It may be that now is the time for you to work out an alternative plan just in case this one does not work for you after all.

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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What Happens if my Life Insurance Company goes broke?

admin — Fri, 21 Jan 2011 04:28:41 +0000

We have had calls from clients asking questions about the financial security of life insurance companies in Australia over the years and have put together the following information for you, this information has been kindly given to us by the Risk Store and is reproduced with their permission. Its aim is to help you understand how the Australian companies protect their policy holders.

I have an existing policy – will I lose this cover if the company goes out of business?
NO – under legislation another insurer will take over this policy and continue the cover as long as the premium continues to be paid.

If I keep paying an existing policy right now could I ‘lose’ the premiums?
NO – the only way you can ‘lose’ premiums is if you make the mistake of allowing your policy to lapse. You will then lose the value of your policy being a ‘guaranteed renewable’ contract. This would be a very dangerous thing to do as you may be unable to apply for insurance later if you develop a health problem in the meantime or if your health is not as good as when you took out the policy.

What if I happen to be in the middle of a claim? Will I lose the ability to continue with that?
NO – legislation will mandate that your claim in progress will be transitioned to a new insurer if necessary.

Why is my policy secure in this way?
Life insurance in Australia is protected by its own special Act of Parliament (refer to the Life Insurance Act 1995 – Act No 4 of 1995 as amended; parts 8 and 9). This forces insurance companies to place funds into a special account (called a statutory fund) that cannot be accessed by the company to use as operating funds or to distribute to shareholders, until all appropriate allowances have been made for a reasonable level of ‘expected’ claims and claim expenses.

In addition there were amendments made to these laws in the 1990s, which mean a special manager (called a judicial manager) will be allocated to the insurance company if they cannot continue to operate. This manager’s key role is to arrange for other insurers to take on the existing policies and claims.

But this is all very well in theory – does it really work?
YES – this system has already saved the policies of thousands of policyholders whose insurance is now held by a new insurer, when two companies in the industry were affected by fraudulent misappropriation of funds in the late 1980s. The laws are even tighter now, too.

If another insurance company takes over my policy can they change the terms I currently have?
NO – they are bound by the terms of an existing pure risk contract, including your current acceptance terms. (At present no insurer guarantees the ongoing premium rate for any group of policies, so it is possible that premium rates across a product type can alter with any insurer. They cannot alter your individual rates, however).

If you do have any questions about this or would like to know more about us, please email me at admin@bronsonfs.com.au or give us a call on (07) 5577 8653

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